Author: Warren Gilmore - Law Student
Edited By: Ryan Carson
One of the most common real estate transactions involve the sale of one’s current home and the purchase of a new home. Many individuals try to synchronize the closing dates for both transactions so that they are buying and selling properties on the same day. Many individuals often believe this to be the best approach with regard to making other arrangements around their closing such as scheduling movers, contractors, etc. However, there are a few other things that individuals in such a situation should consider before arranging to buy and sell real estate on the same business day.
Risks
The biggest risk you face when buying and selling property on the same day arises in the unfortunate situation where the buyer of your property may be unable to close on the deal. In the event that you are relying on these sale proceeds to close your own purchase, this could leave you unable to close yourself.
These delays or inabilities to close on the specified day can happen for a multitude of different reasons, the most common being an unexpected delay in receiving mortgage funds. For example, if Buyer A does not obtain his mortgage funds in time to close his purchase from Seller A, then Seller A may no longer be able to close on her own purchase from Seller B. As you can see, the causal chain here can have far reaching effects. These concerns are not typically considered by individuals involved in this process, but they are certainly not uncommon.
Remedies
If possible, it is always recommended the you schedule your sale to close a day or so in advance of your purchase. This way if the buyer of your property is unable close on the day of for whatever reason, you have provided yourself some valuable time. The only downside to this approach is that you may have to find accommodations for the time between moving your possessions out of the property you are selling, until the closing date arrives for the property you are purchasing.
An alternative option is securing bridge financing, a short-term financing option that is offered by many banks to help clients who find themselves in this very situation. Bridge financing works to provide clients with the funds required to close on the purchase of property without requiring the proceeds from the sale of their current property. Once the proceeds from your sale are finally received, a portion of those proceeds will be directed to the lender to cover the loan and any interest owing. This alternative approach allows individuals the ability to move their possessions into their new home without needing to wait for their sale to close first. Generally, this approach makes for a much less hectic and stressful closing day.
Articles written by Warren Gilmore:
GST/HST New Housing Rebate
Assignment of an Agreement of Purchase and Sale Separation Agreements and the Transfer of Matrimonial Property Estate Planning for Reconstructed Families
Sale of Canadian Property by a Non-Resident
The Prudent Real Estate Investors Checklist Alternative Approaches To Purchasing A Recreational Property Power of Attorney General Overview Power of Attorney General Overview - Continued Non-Resident Speculation Tax
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